Highlights
- The fate of FTC and NLRB efforts to ban non-compete agreements hinges on President-elect Trump’s still unannounced picks to lead those agencies.
- FTC Chair Lina Khan’s successor is unlikely to pursue enforcement of the agency’s non-compete ban, and pending legal challenges may nullify the ban prior to the new chair’s confirmation.
- NLRB General Counsel Jennifer Abruzzo, a vocal proponent of federal efforts to outlaw non-competes, is expected to be replaced soon after the inauguration in January.
- With Khan and Abruzzo out of the picture, federal efforts to ban non-competes are likely to stall and may halt completely.
Over the course of the Biden administration, we have closely monitored parallel efforts by the Federal Trade Commission (FTC) and National Labor Relations Board (NLRB) to ban or limit the use of most non-compete agreements by employers.
Now, in the wake of the recent presidential election, the future of these federal efforts is very much up in the air.
Predicting the incoming Trump administration’s position on non-compete bans is not straightforward. For one thing, the politics of non-competes is uncommonly non-partisan. The four states that generally ban non-competes include both very “blue” states (California and Minnesota) and very “red” states (North Dakota and Oklahoma). In addition, Trump advisors and appointees have conflicting views on the issue. On the one hand, former Florida congressman Matt Gaetz, a close advisor to Mr. Trump and his first pick for Attorney General, has previously publicized his support for the FTC’s non-compete ban. On the other hand, the Texas federal judge who blocked the FTC non-compete ban from taking effect nationwide was appointed by Mr. Trump during his first term.
Ultimately, the fate of FTC and NLRB efforts to ban non-competes will be in the hands of the individuals Mr. Trump picks to lead these agencies. Since winning the election, Mr. Trump has been setting records with the pace of his appointments to key posts but has not yet announced his nominees to lead the FTC and NLRB. Recent reporting, however, offers insight into some of the contenders for these posts as well as the likely fate of efforts by these agencies to ban non-competes once Mr. Trump takes office.
FTC Chair & Commissioners
Current FTC Chair Lina Khan was the architect of the FTC rule finalized last April rendering nearly all non-competes unenforceable, and since then has aggressively defended that rule in the face of decisions by Texas and Florida district courts blocking its implementation. As we recently reported, the FTC, under Ms. Khan’s leadership, filed appeals in the Fifth and Eleventh Circuits earlier this fall seeking to reverse those lower court decisions. After the recent election, however, the future of the agency’s anti-non-competes agenda is murky at best.
The FTC is comprised of five commissioners appointed to seven-year terms, one of whom is appointed FTC chair and serves at the President’s pleasure. Although Ms. Khan’s term as commissioner formally expired this September, President Biden has retained her as Chairwoman since then. While Ms. Khan has received praise in the past from Trump advisors like Gaetz and Vice President-elect JD Vance, she is widely expected to leave the agency after the inauguration in January. According to a recent report, Gail Slater, a former FTC lawyer and advisor to Mr. Vance, is working with the incoming administration’s transition team to vet several candidates to replace Ms. Khan. Those candidates include Ms. Slater herself as well as Andrew Ferguson and Melissa Holyoak, the two current Republican FTC commissioners, among others.
Ms. Khan’s expected departure will leave the FTC split evenly among Republican and Democratic Commissioners until she is replaced. No more than three FTC commissioners can be from the same party, and the terms of the two current Democratic commissioners are not set to expire until 2026 (Alvaro Bedoya) and 2029 (Rebecca Slaughter). It may also be some time until Ms. Khan’s replacement is confirmed. Joseph Simons, the FTC Chair during Mr. Trump’s first term, was not confirmed until May 2018, with Maureen Olhausen serving as acting Chair for nearly a year and a half. If history is any judge, Mr. Trump’s pick for acting Chair could, therefore, be responsible for setting priorities for FTC staff for several months if not longer. This time around, however, a new FTC Chair may be confirmed much sooner given Republican control of Congress.
According to reports, the President-elect is expected to choose either Mr. Ferguson or Ms. Holyoak to serve as acting FTC Chair. Both Mr. Ferguson and Ms. Holyoak voted against the agency’s non-compete ban, and both would likely direct the Department of Justice to withdraw the FTC’s pending appeals in the Fifth and Eleventh Circuits initiated by Ms. Khan to revive the ban. Should that occur, the FTC non-compete ban would, for all intents and purposes, be null and void.
However, a new Republican commissioner would still need to be appointed to outvote the two Democratic commissioners and formally rescind the ban. Alternatively, Mr. Trump and the new Republican-controlled congress could explore nullifying the FTC rule pursuant to the Congressional Review Act even before Ms. Khan’s replacement is confirmed. During his first term, Mr. Trump used the CRA to rescind over a dozen Obama administration regulations.
NLRB Composition & General Counsel
The NLRB is also likely to see a shake-up by the incoming Trump administration.
The NLRB is governed by a five-person board and a general counsel. The latter is appointed to a four-year term and is responsible for prosecuting cases involving violations of the National Labor Relations Act before NLRB administrative law judges. Board members, each of whom are appointed to a five-year term, hear appeals from decisions by NLRB ALJs.
Since her appointment, current NLRB General Counsel Jennifer Abruzzo has issued several General Counsel memos outlining her belief that nearly all post-employment non-competes violate the NLRA, resulting in a flurry of investigations and charges. As we reported, a June 2024 decision in one of these cases finding that the non-competes at issue violated the Act is currently being appealed to the Board. If that decision is affirmed, it would become governing “Board Law.”
Currently, the Board has a 3-1 Democratic majority, with one Republican seat empty and one Democratic seat filled by Board Chair Lauren McFerran. Ms. McFerran’s term, however, is set to expire in mid-December before Mr. Trump takes office. In May, President Biden nominated Ms. McFerran to serve a third term on the Board, but she is still awaiting confirmation by the Senate.
Ms. McFerran’s confirmation could solidify the Democratic majority until at least August 2026. Some observers, however, believe that Mr. Trump may try and remove Ms. McFerran from the Board even if the current Democratic senate succeeds in confirming her. Such a step would be unprecedented given that the NLRA contains protections against removing a Board member without cause before the member’s term expires. However, the Supreme Court’s recent decision in SEC v. Jarkesy has called the constitutionality of these removal protections into question, which may provide grounds for Mr. Trump to try to remove Ms. McFerran even if she is confirmed. If that occurs, or if the current Senate simply fails to confirm Ms. McFerran before Inauguration Day, Mr. Trump will be free to shift Board composition to a Republican majority much more likely to overturn the June 2024 decision finding non-competes unlawful under the NLRA.
While the future of the Board remains unclear, it is widely expected that Mr. Trump will immediately fire General Counsel Abruzzo and her top lieutenant Peter Sung Ohr as soon as day one of his new administration. Although appointed to a four-year term, the NLRB General Counsel ultimately serves at the pleasure of the president. In 2020, President Biden took the then unprecedented step of firing Peter Robb, the NLRB General Counsel appointed by Trump, who had 10 months left in his term at the time and refused Mr. Biden’s request that he resign. Mr. Trump is expected to give the same treatment to Ms. Abruzzo (whose term is not set to formally expire until July 2025).
After the expected removal of Ms. Abruzzo, the Trump administration will appoint an acting general counsel while a permanent replacement moves through the confirmation process. But even an acting GC could unilaterally rescind Ms. Abruzzo’s memoranda on non-compete provisions, replace them with contrary guidance holding that such covenants are not illegal under the NLRA, and dismiss pending charge allegations raising this issue. Whoever is picked, it is expected that the new NLRB General Counsel will put an end to Ms. Abruzzo’s approach to non-competes.
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